Should the cash value grow to an unusually large amount,the amount of insurance coverage must be increased in order for the policy to retain its favorable tax treatment.

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According to IRS regulations, if the cash value of a life insurance policy grows to an unusually large amount, the amount of insurance coverage must be increased in order to maintain the policy's favorable tax treatment. This is referred to as the Corridor Rule. If the policy's cash value exceeds the corridor limit, it may be subject to taxation as a modified endowment contract (MEC). Increasing the coverage amount helps to prevent the policy from becoming a MEC.

Should the Cash Value Grow to an Unusually Large Amount,the